The preliminary University of Michigan Consumer Sentiment Index for June improved slightly to a reading of 99.3 after slipping to 98 in May. Consumers appear to be more confident with their current situations while pulling back slightly on expectations for the future.

As interest rates continue their measured rise and inflation hovers around the Federal Reserve Bank’s magic 2% level, consumers will be watching for signs that it’s time to reduce discretionary spending and, perhaps, save a bit more.

Economists polled by Bloomberg were expecting a preliminary June reading of 98.5.

The month-over-month consumer expectations sub-index fell 1.9% to 87.4 from 89.1 and the current conditions sub-index rose 5.5% to 117.9 from 111.8.

Year-over-year, the consumer sentiment index is up 4.5%, the current conditions sub-index has gained 4.9%, and the consumer expectations sub-index has added 4.3%.

The survey’s chief economist, Richard Curtin, said:

Consumer sentiment rose slightly in early June due to consumers’ more favorable assessments of their current financial situation and more favorable views of current buying conditions for household durables. The Expectations Index, in contrast, declined to its lowest level since the start of the year due to less favorable prospects for the overall economy. The sharpest divide was between the record number of households who mentioned recent income gains and the highest expected year-ahead inflation rate since 2015. At some point in every economic expansion, favorable income and job prospects act to offset higher inflation and interest rate expectations. Only when inflation and interest rates are expected to persistently exceed income and job prospects will consumers begin to curtail their discretionary spending. Indeed, greater certainty about future income and job prospects have become the main drivers of more favorable purchase plans. … The unemployment rate during the year ahead was more often expected to decline than increase (29% versus 23%), with most (48%) expecting it to remain unchanged at its current low, which should modestly accelerate purchases. Moreover, the continued small declines that are now anticipated in the unemployment rate, as well as more robust gains in household income, will bolster real personal consumption expenditures during the year ahead.

Final data for the month is scheduled to be released on June 29.

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